Visa takes on PayPal with Checkout button for Web and mobile payments

In its latest attempt to crack online and mobile payments, Visa has unveiled a system which lets virtual shoppers complete purchases with a couple of clicks.

The new feature is launching in the US, Canada and Australia, replacing the V.me digital wallet, which was introduced only two years ago. However, in Europe V.me survives.

Aping PayPal and Pay with Amazon, Visa Checkout will see retailers embed a button within their sites and apps so that customers can make payments without having to navigate away.

Customers register their Visa debit or credit card directly or through their bank and can then complete purchases by hitting the Visa Checkout button at participating retailers and entering their username and password.

Sam Shrauger, SVP, digital solutions, Visa, says: "People aren't looking for another wallet - they just want a simpler way to pay online, particularly on mobile devices, and that's exactly what we designed Visa Checkout to do."

A host of retailers, including Neiman Marcus, Pizza Hut, Staples and United Airlines, are committed to the system, along with 180 financial institutions, including BofA, Citi and Wells Fargo.

While Visa Inc is ditching V.me, its cousin Visa Europe is committed to the wallet approach, confirming that it will expand the service to eight new counties over the next few months.

Wendy Martin, executive director, V.me by Visa, says: "We believe in a European wallet for our European customers. That's why we've taken the decision to retain the V.me by Visa brand, along with its bank-centric approach."

Already live in four countries, V.me will come to Germany, Ireland, Norway, Sweden and Italy by the end of the year with pilots in Greece, the Czech Republic and Slovakia slated for 2015.

To help push V.me and other projects, Visa Europe has committed EUR200 million to support the development of its digital payment services.

Meanwhile, back in the US, Visa has opened an innovation centre in San Francisco that will house 500 staffers, including technology experts and developers "whose mission will be to ensure that every Internet connected device, appliance or wearable computer, can become a secure place for commerce".

Comments: (13)

Visa should be able to do better than that: they can treat e-comm transactions that go through V.me as "cardholder present". That would provide VERY strong incentive for merchants. The same goes for tokenization. If that card is played smart, PP could be
dead in a few years...

"Visa should be able to do better than that: they can treat e-comm transactions that go through V.me as "cardholder present". That would provide VERY strong incentive for merchants."

If they do that, which is quite doubtful since interchange is partly based on risk, then the likes of Paypal will also benefit from it.

"The same goes for tokenization. If that card is played smart, PP could be dead in a few years..."

Tokenization... is a big word. But does not quite do the job as we have seen with Bitcoin...

If Paypal's strength was just convenience, then they would not have survived and succeed. Paypal offers more than just convenience to consumers. It was the first to offer ODR (online dispute resolution) which card schemes are just now looking into. Paypal
also has a very sophisticated and effective fraud detection system which a PSP needs if it offers the convenience of just userid/password.

And Paypal is more than a userid/password. It is a wallet where a user can fund his payments from different sources. Paypal's loading costs are lower because they enable and motivate their users to fund their payments with their bank accounts. And finally,
one money-making aspect of Paypal is cross-border / currency exchange. How will this be managed by the new VISA Checkout?

In summary, VISA's initiative to offer the convenience of userid/password is a step in the right direction. But does it offer the same security and guarantees to consumers?

Visa controls its rates and corresponding rules (if we disregard Visa Inc vs Visa Europe) situation. It also has direct relationship with every major issuer. Most importantly, they cover both online and offline (physical retail) payments. PP has none of
that.

PP has good risk management procedures, but that is becoming less relevant - due to the current changes/trends in mobile payments. Funding PP via bank a/c - how is that different from a debit transaction (which Visa can do)?..

ODR vs CP - there is nothing to dispute with the latter... (from liability point of view)

Yes, Visa and MC need to improve UX etc, but that's another matter. From my perspective, it's more about "rails". PP just rides them for now (i.e. is allowed to). That could (will) change...

"ODR vs CP - there is nothing to dispute with the latter... (from liability point of view)"

Yes but these are CNPs not CPs... You can't make them CPs just by changing the interchange fees.

"PP just rides them for now (i.e. is allowed to). That could (will) change..."

PayPal Europe has a Luxembourg banking license. PP is indeed riding the rails and they pay for riding these rails. VISA and MC and their issuing banks earn each time a card payment is done in Paypal. Paypal impacts the acquiring business. VISA checkout is
more to 'placate' acquiring banks and merchants. Given all of the above, I can't see how and why Paypal would be banned from accepting card payments.

"What about ECB requirement of strong 2factor authentication and user ID + password? Does this check out fly in Europe?"

The trend since Paypal and Amazon 1-cick is "LESS is MORE". Note that these 2 apply their own fraud detection and they take responsibility for their own transaction losses due to fraud. One would see that 'transaction losses' is one of the KPI basis reported
in their financial statements. Paypal has been quite transparent with their transaction losses.

Back to your question... ECB requirement? Is this a guideline or requirement? Can this really be required?

Jan-Olof Brunila - Swedbank - Stockholm | 20 July, 2014, 15:56
Legal requirement yes indeed. The ECB strong 2factor authentication for internet related payments has been signed by all FSA:s in Europe making it a regulatory compulsion from 2015. The ECB - and the FSA:s - are expected to publish their mobile payments
security requirements in the fall of 2014 with similar rules ecpected to kick in from 2017. 3party schemes like paypal are however exempted since the payer and payee accounts are in the same institution. But if you fund your papypal account from e.g. A visa
card, the requirements need to be met.

"The ECB strong 2factor authentication for internet related payments has been signed by all FSA:s in Europe making it a regulatory compulsion from 2015"

What is a strong 2factor authentication? Given an amazon experience, one can say that their convenient 1-click already has the attribute of a 2FA. userid/password is what I know and my shipto address or ipaddress/geolocation is what I have.

A 'stronger' 2FA that removes this convenience would be a disaster for consumers and eCommerce. Indeed one can compare this to a missile targeting a fly..

Interesting how Apple just completely changed the context of precisely this type of discussion. It has introduced xFA (where we cannot be sure what x vale is yet), introduced tokenisation 'at a stroke', and maybe even reversed interchange - a lot of the
details are unclear, but this will disrupt the market and turn our thinking a lot as details and the market evolves.